City File: Colourcare is cut loose

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The Independent Online
IN APRIL, this newspaper suggested that London International Group, maker of Durex condoms, was heading for a fresh financial crisis and had great problems in getting shot of its cash-draining subsidiary, Colourcare.

Last week, LIG announced its long-awaited sale. Colourcare has been sold to its management for a nominal sum, debt free and with a pounds 6m interest-free loan from its parent.

With Colourcare out of the way, LIG can concentrate on its expected rescue rights issue. Even though the shares, at 116p, are bumping along the bottom, they are still no bargain. Steer well clear.

THIS may be the moment to snaffle a few shares in Sidlaw, the packaging, oil services and yarn-spinning group that last year bought Courtaulds' flexible packaging businesses for pounds 79m. That deal trebled the size of Sidlaw's packaging division and gave it a strong European base. But it was financed by a four-for-seven rights issue, which caused a bad bout of indigestion in the shares, taking them down from 325p to 271p.

That cleared, and at the beginning of this month the price broke through the important 350p barrier.

However, it has since paused, marking time at 338p. At that, the shares yield a useful 4.2 per cent and sell on only 15 times likely 1994 profits of pounds 16.4m, up from pounds 11.1m. Part of that is coming from the former Courtaulds units, but even so earnings per share should rise from 20.1p to 22.4p. Buy.

OVER the past few years Cluff has been transformed from a mediocre oil company into one of the best gold plays around. The shares remain below 50p, depressed by the prospect of a small operating loss this year. But, as Tim Petterson of James Capel points out, Cluff has announced a new gold mine in Ghana and a big expansion in Zimbabwe. Its market capitalisation represents only dollars 50 per ounce of its gold reserves, a substantial and appetising discount to its rivals.

BRITISH Airways' success in getting permission to fly into Orly is a swallow that could well lead to a summer. If the French can't stop competition, then no one can. Other news is also good. BA's European affiliates are responding to treatment, and the other threat to earnings - from the stake in US Air - has been greatly exaggerated. According to Mike Powell of NatWest Securities, BA is seeing a recovery in business traffic, and its capacity increase slows dramatically in 1995, leaving room for virtually costless revenue increases.

Once the market absorbs BA's profits - which Powell estimates at pounds 307m, a full pounds 100m more than last year - to be announced tomorrow, the shares could, to coin a phrase, really take off from their present lowly 378p.

SHARES IN Westbury, the house builder, zoomed 17p last week to close at 180p in response to a big turnaround in the company's fortunes. In the year to February, a pre-tax loss of pounds 2.2m was replaced by profits of pounds 8.3m. But, according to Robin Hardy at brokers Panmure Gordon, there is more, much more to go for.

The market has not forgiven Westbury's past problems. But Mr Hardy, long a bull of the shares, points to the highly effective new management team, the solid balance sheet, and earnings per share that could jump from 9p to 16p a share in the next couple of years.

THE directors of Greene King will be gnashing their teeth this week when they see interim results from Morland, the brewer that escaped their grasp in the summer of 1992 - even though they are sitting on a profit on their 29 per cent holding. Since then, Morland's Old Speckled Hen bitter has gone national, giving the Oxford firm a considerable lift.

But the shares have not responded. This year, they have languished at between 500p and 550p on fears that Greene King and Whitbread would unload their stakes. Yet the market absorbed Whitbread's 11 per cent without a blink. The interim results could make the shares really cut loose. Hold.

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